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Nifty (8433.7): The immediate term outlook has turned weak for Nifty after its recent fall. The index now finds a crucial immediate support at 8,320.
A close below this level can change the medium-term outlook to negative for Nifty. A close above 8,715 will change the long-term outlook to positive.
F&O pointers: The Nifty futures gave up most of its premium that it was commanding over the Nifty spot index at the start of the series. It now trades at a premium of 24.45 points over the spot index.
This signals heavy unwinding of long positions, particularly by foreign institutional investors. Option trading indicates a major support at 8,200 and resistance at 9,000.
Strategy: Traders can consider long straddle strategy on Nifty, using options. Volatility is expected to rise on the back of US elections results to be known on November 8-9.
Traders can consider buying 8500 call and put options that ended the week with a premium of ₹105.35 and ₹146.8 respectively. This will cost investors about ₹18,910, as the market lot is 75 for Nifty options.
We advice traders not to hold the position beyond November 15, as volatility is likely to subside after the result is out. This will impact the value of the premiums sharply.
Traders could consider quitting the position, if the combined value of options reaches ₹25,000 or dips to ₹14,000.
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